Equipment rental company United Rentals saw its rental revenue bolstered by strong demand and fleet productivity in the first quarter.
Rental revenue for Q1 was $2.7 billion, up 26% year over year, according to the company’s earnings release. The company’s total change in equipment rentals was up 16.6%, which is adjusted pro forma due to the acquisition of Ahern Rentals on Dec. 7, 2022.
“Looking more closely at the first-quarter demand, key verticals saw growth across the board, led by nonresidential construction, industrial manufacturing and power,” United Rentals Chief Executive Matthew Flannery, said during the company’s earnings call Thursday. “Geographically, we saw much of the same, including double-digit growth in all our regions. The level of demand provides another positive indication of how our customers are feeling about their outlook and the need for equipment.”
The Stamford, Conn.-based company has 1,465 branches across North America as of March 31, including 1,319 branches in the United States, with a branch in every state except Hawaii, according to the earnings presentation. The company’s fleet of 990,000 units is valued at $20 billion and had an average rental fleet age of 53.4 months as of the end of Q1.
Fleet productivity
United Rentals’ fleet productivity, which reflects the combined impact of changes in rental rates, time utilization and mix on owned equipment rental revenue, was 2% in Q1, compared with 8.9% in Q4 2022 and 13% in Q1 2022. The company’s adjusted fleet productivity factoring the Ahern acquisition was 5.9%.
“Fleet productivity increased by 2% as reported, adding another $36 million, but this was partially offset by our usual fleet inflation of 1.5%, or $27 million,” Flannery said. “On a pro forma basis, rental revenue is up a robust 16.6%, and fleet productivity increased by a healthy 5.9%.”
The company holds a 17% of the North American market, based on American Rental Association industry estimates, making it the largest equipment rental company by market share.
Used equipment sales up 84%
Beyond equipment rentals, United Rentals’ revenue from the sale of used equipment also increased, clocking in at $388 million, up 83.9% YoY, according to the release. The sale of new equipment totaled $44 million, down 2.2% YoY. The significant increase in used sales was due to market and inventory normalization after the pandemic and the purchase of Ahern, Flannery said.
“We think we’ll return to a more normalized cadence as we open up other channels as opposed to the last couple of years where we’ve been primarily retail, so think about a little bit less in two and three years and then ramping it back up again in four as the fleet comes off rent,” he said. “Q1 and Q4 is [a] lower utilization period, so it’s when you have the opportunity to sell the fleet a little easier.”
Shares of United Rentals Inc. [Nasdaq: URI] were trading at $361.11 at market close Friday, down $3.45 or 0.96% from market open. United Rentals has a market capitalization of $25.06 billion.
